PARIS METROPOLE: BECOMING CARBON- NEUTRAL BY 2050Shell Scenarios

2025 2035 2045 20552020 2030 2040 2050 2060

www.shell.com/ParisSketchleonard.vinci.com

CONTENTSFOREWORD 3

SUMMARY 4

KEY INSIGHTS 6

INTRODUCTION 8

PARIS TODAY 11Innovation 11Inequality 13Emissions 14

THREE SCENARIOS 16Green Tech Evolution 16The Blame Game 22Paving the Way 26

CONCLUSION 32Acknowledgements 34Glossary 34Endnotes 34

A COLLABORATIVE APPROACHShell and Leonard (Vinci Group) organised a scenarios workshop in Paris in 2019, bringing together public, private and civil society stakeholders. The objective was to broaden the conversation about the future of the Paris Metropole and the collaborations required to address common pressures, in order to transform the ways in which we work together to meet the goals of the Paris Climate Action Plan. The workshop assembled 45 experts from 30 different institutions, including the Paris City government, the Île-de-France region, the French State Ministry for the Ecological Transition, the Organisation for Economic Co-operation and Development, the International Energy Agency, researchers from Sorbonne and Stanford universities, as well as some of the largest French companies. This publication updates the scenarios that were developed at the workshop to take into account the impact of COVID-19.

BY AURELIEN FABRE, USBEK & RICAFOREWORD

On September 2, 1944, after the French regained control of Paris following four years of occupation, Paul Valéry wrote a short text entitled “Respirer” (Breathe) for the French newspaper Le Figaro; it contained several points which have astonishing resonance today:

It is about trying to build a whole new era. Here we are before a universal disorder of images and questions. We will confront unprecedented situations and problems, in the face of which almost everything we have learnt from the past will be feared rather than contemplated. We must begin with an in-depth analysis of the present…to prepare ourselves for what is needed and protect ourselves…from surprises and sudden changes in the environment.

This could be a clear and modest definition of the scenario exercise: “to prepare ourselves for what is needed and protect ourselves…from surprises and sudden changes in the environment.”

In 2020, as the world experiences a global health crisis, many recall that the possibility of a major pandemic had been widely predicted, and yet the world and its cities have been very unevenly prepared to face it. From this perspective, the COVID-19 pandemic could be a precursor of shocks to come, under the combined effect of global warming, loss of biodiversity and the exacerbation of socioeconomic inequality. The crisis reminds us of the vital importance of preparation and of our collective ability to imagine the future.

On a global scale, it is becoming clear that cities are key links in the chain for designing and implementing the climate transition. Examples include the important role played by city mayors at COP 21, the C40 Cities Climate Leadership Group which aims to make cities healthier and more sustainable, and the UN’s Habitat III Conference on Housing and Sustainable Urban Development.

The scenarios exercise, led by Shell and Leonard, intended to create transition scenarios for the City of Paris to achieve carbon neutrality by 2050. By inviting universities, experts and practitioners from many different professional fields and disciplines to work together, this exercise led to the emergence of jointly constructed, pluralist visions for the future of the Paris Metropole.

3

Cities connect global dilemmas with local realities. They have powerful levers to guide transitions – ensuring economic and industrial activities stay within environmentally and socially acceptable limits for the people that live there.

The City of Paris has embraced this responsibility and set an admirable and ambitious objective to be carbon-neutral by 2050. To achieve the goals of the Paris Climate Action Plan, transformation must be broad – extending beyond the city to include neighbouring departments. As a result, the geographic focus for this set of scenarios is the Paris Metropole (Figure 4, page 12). The Paris Metropole will need to tackle multiple social and environmental challenges over the next two decades. The scale of adaptation is immense. It will require systemic changes and it will test cities’ capacities for invention. Equally, there is cause for enthusiasm and optimism as the breadth and depth of the work that lies ahead could be an inspiration for others.

Issues such as climate change and equality will form the backdrop against which governments, organisations, institutions and individuals will have to make many tough choices in the coming years. A just transition that is fair for all will be critical – how this is managed could slow, stall or accelerate decarbonisation and progress towards climate neutrality. The years leading up to 2040, therefore, must be marked by a movement that is inclusive of the entire population, relies on evidence and facilitates positive and proactive collaboration that transcends resentment and boundaries.

This sketch explores three scenarios: Green Tech Evolution, The Blame Game and Paving the Way. Each describes different visions of the future for the Paris Metropole in 2040. The scenarios consider shifting socioeconomic, political and technological forces during the next two decades. They are all framed by two key uncertainties (socioeconomic inequality and policy governance) and one important shared challenge (the effects of climate

SUMMARY

4

change). Each scenario illustrates a pathway to 2040 and describes progress, or lack thereof, towards the goals of the Paris Climate Action Plan. Each scenario also indicates what would need to happen beyond 2040 for the Paris Metropole to become carbon-neutral. The overall purpose of this broad exploration is to guide the wisest possible choices and actions that should be taken now to achieve the shared ambitions for the Paris region.

Green Tech EvolutionIn Green Tech Evolution, France vigorously pursues its ambitious plans to become Europe’s leading technology innovation and start-up nation, which eventually opens up a greener economic future. The main driver in pursuing climate-friendly innovation is the economy. But change is only incremental, so coordinated government policy is required to speed up the energy transition to become climate-neutral by 2050.

The Blame GameIn The Blame Game, longer-term climate-related policy decisions are placed on hold, as immediate social and economic problems take priority. Inevitable extreme weather events increasingly hurt the most vulnerable in the Paris Metropole. Growing mistrust turns to anger and activism. Eventually, demands for action to address equality and climate change result in a sustainable and inclusive economic growth model.

Paving the WayIn Paving the Way, local city mayors and communities collaborate to design evidence-based policy options that address climate change within the Paris Metropole. Choices are spurred by citizens’ concerns over climate and an awareness that connects well-being, health, climate and inequality, drawing all segments of society into the debate to achieve steady and effective progress.

Green Tech EvolutionTechnology-led

The Blame GameActivism-led

Paving the WayCommunity-led

Economy

TrustPolicy

Just and fair transition

Figure 1: Paris Metropole scenarios

5

Align governance at all levels. Different layers of government have different goals and mandates. In the Paris Metropole, for instance, local government can be proactive in areas such as infrastructure and micro-mobilities (e.g. electric scooters and e-bikes). Regional and national governments can set targets and create conditions to support green solutions and innovation, and drive changes in behaviour. The interplay between all levels of government – local,

regional and national – will be key to ensuring that society pulls in the same direction, giving itself the best chance of becoming carbon-neutral by 2050.

A just transition that is fair for all will be critical. Climate and socioeconomic equality are strongly linked. The Paving the Way scenario shows that decarbonisation can occur at vastly different speeds in different places, depending on socioeconomic conditions. Wealthier areas are likely to

1

2

Four key lessons emerge that are common to all three scenarios. To make progress, public and private decision-makers in the City of Paris and neighbouring departments must act now and continue to drive change through the 2020s and beyond for the Paris Metropole to become carbon-neutral by 2050.

KEY INSIGHTS

6

have time to be more concerned about climate change and have more resources to tackle it. Decarbonisation itself, in turn, can lead to serious growing economic disparity, as in Green Tech Evolution, where green solutions in urban hubs improve socioeconomic standards, but with limited spillovers into other areas – at least initially. Considering and mitigating socioeconomic disparities – both current and future – will be essential to decarbonise successfully.

Parts of the Paris Metropole that can move quickly must do so. Carbon neutrality will occur at different speeds across the Paris Metropole. Public and private decision-makers in the City of Paris and neighbouring departments that can move quickly must harness the public’s desire to decarbonise and start to act now.

Progress on energy transitions depends on collaboration across government, society and business.Key drivers in the scenarios include citizen involvement reinforcing local government; technology solutions supporting a greener economy; and climate activism among citizens driving government and business action. Achieving climate neutrality is not about an either/or approach, it is about adopting an and/and approach. Public-private partnerships and cooperation will be essential. To effect real change across government, business and civil society, leaders must deploy all the tools at their disposal and individuals must take responsibility for their actions as part of that change.

3

4

7

INTRODUCTIONA carbon-neutral Paris MetropoleCities are essential actors in the global energy transition to achieve the 2015 Paris climate agreement to keep global temperature rise well below 2°C above pre-industrial levels. Roughly two-thirds of energy consumption today occurs in cities, and this will increase as urbanisation trends intensify. Cities consume over two-thirds of the world’s energy and account for more than 70% of global CO2 emissions1. How cities manage energy will depend on policies, technologies and the choices people make. It will require addressing energy, environmental, mobility and other urban services. It will also require engaging with citizens, consumers, governments at various levels and providers of urban services, and delivering these services in an integrated, efficient and low-carbon way.

The Paris Metropole has the opportunity to demonstrate and exemplify the leadership required to achieve its namesake, the Paris Agreement2.

In May 2018, the Paris municipality released the Paris Climate Action Plan, setting out the objective of “making Paris a carbon-neutral city powered entirely by renewable energy by 2050.” It established detailed targets for 2030 and a vision for 2050 (Figure 2, page 9).

Since then, the COVID-19 pandemic has plunged the world into an unprecedented crisis, both in terms of health outcomes and the economic effect of measures taken to protect health. It has led to widespread disruption in domestic economic activity, in global travel and tourism, and in how we live our lives. While the pandemic has taken an enormous human and economic toll, recovery from its effects provides an opportunity to direct resources, public and private, to support both economic recovery and energy transition simultaneously.

Achieving the objectives of the Paris Climate Action Plan means rewiring the Paris economy and re-imagining the urban landscape. It demands fundamental changes to how citizens live their lives and conduct their

8

-50%*of local greenhouse

gas emissions

-40%*of the Paris

carbon footprint

-35%*of energy

consumption

45%*of renewable energies in

overall consumption, including 10% locally produced

Guarantee a pleasant living environment that is adapted to the climate for all Parisians.

fossil fuel and domesticheating oil area

ZEROBecome a

CO2 CO2

AIR

By 2030 Paris has set the following targets:

-80%*of the Paris

carbon footprint

-50%*energy consumption

throughout the territory

Commit the actors of the Parisian territory to offset the residual emissions in order to reach100%*

of renewable energies including 20% locally produced

Ensure the climate resilience of Paris and carry out a socially fair transition.

local greenhouse gas emissions area

ZEROMake Paris a

CO2 CO2

By 2050 Paris has set the following targets:

CARBON NEUTRALITY

* Compared to 2004

Conform to the World Health Organization recommendations on

AIR QUALITY

Source: Paris Climate Action Plan

Figure 2: Paris Climate Action Plan objectives in 2030 and 2050

9

business, as well as a more comprehensive policy and integrated governance approach across the Paris Metropole.

Among the other challenges are the city’s fast urbanisation, the projected increase in population and the rising demand for mobility services. All of these are driving growth in energy demand. Climate impacts, such as the growing frequency of extreme weather events, risk exacerbating the already rising income and wealth inequalities in the Paris Metropole and across the wider Île-de-France region. The layered governance of the region will further complicate the task ahead.

Fortunately, the Paris Metropole is well equipped to navigate these potential adversities. It has a strong economy supported by innovation and tourism, a young population with a dynamic

culture of entrepreneurship, a skilled and educated workforce, and a less emissions-intensive economy compared to the rest of France and other large European cities like London. In addition, there are relatively straightforward ways for the city to improve waste management, road traffic congestion and the public transport network – steps that would lower emissions further.

Still, full cooperation between all parts of society and all sectors of the Paris Metropole economy will be essential. The three scenarios explore the interdependencies and uncertainties – social, political, economic and technological – as the Paris Metropole evolves over the next two decades, and what it will take to bridge the gap from 2040 to achieve carbon neutrality by 2050.

10

PARIS TODAY: INNOVATIONTo understand the opportunities and challenges associated with the Paris Metropole becoming carbon-neutral by 2050 requires knowing where it stands today. Each of the scenarios is based on a combination of trends specific to the Paris Metropole – social, political, economic and technological – to describe three robust and internally consistent alternative pathways along which the city could evolve.

Given the youth and dynamism of Parisian culture, its residents may be quick to adapt to disruptive technologies, such as free-floating electric scooters, shared electric cars and bicycles. The metropole’s relatively young population also benefits from the world’s largest start-up campus and Europe’s largest co-working space.

The Paris Metropole economy is highly innovative relative to comparable European cities and an attractive destination for investors. For example, the Paris Metropole has remained the top-ranking metropolitan area in terms of projects funded by foreign direct investment in 2019, overtaking London in 20183, and it has one of the highest R&D expenditures per capita – higher than Berlin, London and Madrid (Figure 3).

The innovation economy is supported by a workforce that is becoming better educated and shifting towards professional occupations. For example, nearly 30% of workers occupy senior management or professional positions and around half the working population is university-educated.

Brussels Capital region

3,000

2,500

2,000

1,500

1,000

500

0

EUR

per c

apita

Copenhagenregion

Helsinkiregion

Île-de-France Berlin Greater Madrid

Greater London

Figure 3: R&D expenditure per capita in the Île de France region compared to other European cities (see Figure 4 outlining the Paris Metropole and regions)

Source: OECD, Vivid Economics analysis4

11

Unlike the Île de France or the newly formed Greater Paris, the Paris Metropole is not a single political entity; instead it represents the diverse nature of the constituent parts. The Petite Couronne (Little Crown) consists of three departments of Île-de-France bordering the French capital. The Grande Couronne (Greater Crown, i.e. outer ring) includes the outer four departments of Île-de-France not bordering Paris.

95 – Val d’Oise

78 – Yvelines

91 – Essone

92 – Hauts-de-Seine

Paris

Suburbs

Outer ring

Usually, the suburbs are referred to as the Petite Couronne, while the outer ring is referred to asthe Grand Couronne

Key77 – Seine-et-Marne

94 – Val-de-Marne

93 – Seine-Saint-Denis

75 – Paris

Figure 4: In this sketch, the Paris Metropole includes Paris and its neighbouring departments (departments 75, 77, 78, 91, 92, 93, 94 and 95)

12

<-10-10 to -5-2 to -2-2 to 2

2 to 55 to 10>=10Urban area limit

PARIS TODAY: INEQUALITYLevels of inequality in the Paris Metropole have increased sharply in the past 15 years, particularly in terms of income disparity and living standards. Poor areas in the north and east of Paris have become poorer relative to the metropole, while richer areas in the centre and west of Paris have become even richer. (Figure 5).

The cost of living and stagnating wages are important causes of increasing inequality, while youth unemployment and access to education remain more difficult compared to other major cities such as London and Berlin.

Figure 5: The difference between high and low incomes has increased between 2001-2015.

Source: Gentrification et paupérisation au coeur de l’Ile-de-France Evolutions 2001-2015, Institut d’aménagement et d’urbanisme (IAU). This map is based on data by Insee, FSL and Filosofi.

13

PARIS TODAY: EMISSIONSThe Île-de-France economy is less emissions-intensive than other regions5, as it is dominated by service-based sectors such as science, tourism-driven commerce and public administration. All Île-de-France departments outperform the French national average of 5 tonnes of CO2-equivalent per capita, with Paris the lowest at 1.5 tonnes per capita. Emissions per capita are also lower in Île-de-France than in London (3.5 tonnes per capita)6. Road traffic and buildings are the largest sources of emissions, accounting for 70% of CO2 emissions and 50% of particulate matter. (Figure 6, page 15).

While the public transport network within the city is very dense and one of the most affordable in Europe, connections between communes in the suburbs are lacking. Public transport accounts for 65% of transport in Paris, but 44% of transport in the wider Île-de-France region7. Government incentives for uptake of electric vehicles in France8 and the new Grand Paris Express metro network provide residents of the city’s outer ring suburbs with low-carbon commuting alternatives and scope for reducing emissions from road transport.

14

Paris’s aging building stock is very energy-inefficient. Buildings account for more than 40% of CO2 emissions; over one-third of buildings in the region have the lowest F or G energy efficiency rating, while only 2% of buildings achieve standards set by the most recent energy efficiency law9. Worst in the region is Paris city, where around half of the buildings pre-date 194610. The Paris Climate Action Plan sets a target of 1 million buildings thermally renovated by 2050, but so far only 25% of thermal renovations have improved the buildings’ energy efficiency rating11.

Figure 6: Road transport and buildings are the largest polluters by a significant margin; they account for more than 70% of CO2 and 50% of PM10

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%CO2

Île-d

e-Fr

ance

PM10 PM2.5

Agriculture andconstruction are also significant emitters

of particulate matter

Rail and river traffic Construction Agriculture

Airports Waste Energy

Manufacturing Road traffic Buildings

Source: Ministry for the Ecological Transition, AirParif, “Bilan des émissions de polluants atmosphériques et de gaz à effet de serre” and Vivid Economics analysis. Note: Energy is defined as thermal power plants, installations for the extraction and refining of oil, and service stations.

15

SCENARIO ONE GREEN TECH EVOLUTION

THE IMPACT OF COVID-19 ON THE PARIS METROPOLEThe forced lockdown during the COVID-19 pandemic disrupted social norms and stalled the economy; but it also accelerated the transformation of relationships with technology and digital services. Businesses and academic institutions took this opportunity to invest heavily in their digital presence and produce innovative solutions to the new reality of social distancing. Technology also played an essential role in enabling the economy to reopen. Data from track-and-trace apps reveal corridors that

connect COVID-19 low-risk regions and countries to one another. Equally important were national and international corporations working collectively to ensure the economic recovery was climate friendly. A renewed effort to build back better for the future ensued.

GREEN TECH EVOLUTION: KEY ATTRIBUTES Q The COVID-19 disruption drives investment in innovative digital solutions to enable social distancing and hasten the reopening of economies.

Q In a technology-led economic recovery, Paris fast becomes the innovation and start-up hub of Europe. But the underlying problems of inequality and deprivation across the Paris region are largely left unaddressed.

Q The economic recovery is climate friendly, with national and international corporations working collectively to find innovative ways to reduce emissions in a renewed drive to support efforts to build back better as society recovers from the COVID-19 crisis.

Q The divide between the digital haves and digital have-nots widens in the 2030s. There is progress on energy transitions, but not everyone benefits. Energy access and affordability continue to be a challenge for many.

Q By the 2040s, a move towards greater government coordination across the Paris Metropole results in increased shared prosperity. The city and beyond makes fast – although belated – progress on its 2050 carbon neutrality goal.

17

GREEN TECH EVOLUTIONBy the mid-2020s, Paris is fast becoming the innovation and start-up hub in Europe in technology-related industries. Large public investments are made to future-proof skills, while also kick-starting the economic recovery. In turn, this drives private investors looking for long-term investment opportunities and start-ups benefitting from historically low costs of borrowing. While much of the innovation takes place at the start-up level, several large companies see opportunities for large investments, helping nascent technologies and solutions to scale up. A vibrant, young, tech-savvy community centred on Paris thrives in this new digital world and seeks to solve complex urban problems in an integrated fashion. Investments in 5G and 6G networks

are prioritised and act as a springboard for innovation and technology deployment.

However, while the economic bounce-back is relatively quick, the underlying problems of inequality and deprivation across the Paris Metropole are largely overlooked, with attention and resources directed towards innovation. Technology clusters and corridors thrive, but with limited spill-over to the less prosperous departments. The problems of inequality and economic deprivation worsen in the 2020s. Citizens’ distrust of institutions grows, leading to frequent protests. In those struggling departments, long-term unemployment – or jobs without security – grows, and the level of education disparity increases.

Through the 2020s, public awareness of the need to tackle climate change increases across

18

France. Policymakers face more pressure to put the country on a trajectory to achieve its legislated 2050 climate-neutral target. Mainstream policy focus shifts towards creating a sustainable green economy, directing technology-led innovations from the start-up sector towards green solutions for businesses and consumers. For example, the Paris Metropole develops programmes to support innovation and the application of technology to deliver more efficient and lower-carbon urban services. In addition, environmental criteria become stronger over time, driving the adoption of these green technologies and practices.

A key feature of these programmes is their focus on flexibility and resilience to climate change. Existing underground transport networks, such as low-carbon train and metro lines, enable the broadband cabling network to be upgraded and extended. Business models are redefined

There is asymmetry between the dynamism of technological innovation and the political and institutional support necessary to spread the benefits of innovation throughout the economy and society.

Elisabeth Grosdhomme Managing Director of Paradigmes et caetera

19

and unconventional collaborations emerge. Infrastructure investment follows the proliferation of green tech solutions to facilitate their greater take-up. Multiple modes of low-carbon transport form part of a circular and pro-environmental economy. Benefits are achieved across sectors using artificial intelligence (AI), making homes smarter, dramatically reducing waste and increasing efficiency across urban services. Sharing economy apps help reduce material consumption at the household level, energy consumption in buildings is actively optimised, and waste is sorted with the help of AI technology.

But the rush to support the high-tech economy comes at the expense of investment in wider infrastructure and other traditional sectors and urban services. As automation and AI displace overqualified but ill-equipped labour, a section of the middle-class becomes unemployable. Traditional industries face an existential threat to integrate new technologies or perish. Citizens grow anxious of their future prospects.

Even as Paris becomes the world leader in green technology innovation, the divide increases between the digital and economic haves and have-nots. While economic recovery and growth post-COVID-19 pulls the City of Paris into a new economic reality, other areas in the metropole are slower to evolve. Boosting education and skills becomes increasingly critical, although a comprehensive strategy to address the disparity is slow to appear. By 2030, tensions increase between the younger generation that has adapted and thrived in the new economy and the older generation whose skillset and employment lag behind. Tensions also increase between the wealthier and poorer departments.

The prosperity created by green technology evolution leads to introspection and the recognition that these tensions must be addressed if Paris is to continue to

prosper. Digitalisation is already leading to democratisation in the deployment of and access to urban services, be they efficient waste collection, smart buildings or low-carbon transport. A wide-ranging infrastructure upgrade programme is launched to support low-carbon choices and enhance life for citizens, consumers and businesses. Digital solutions continue to develop and proliferate alongside this infrastructure programme, across the range of urban energy, transport, housing, waste and water services. Tensions are further defused as the government initiates education and retraining initiatives to support more of the local population in the start-up and scale-up revolution. A generation of blue-collar workers shifts to the new economy.

Bridging to carbon neutrality

By 2040, Paris leads the green economy evolution in France and across the world. Prosperity spills out from Paris, with the outer Paris Metropole starting to catch up. However, in this technology-led scenario, the level of coordination required to achieve the 2050 carbon-neutral objective is only beginning to emerge in 2040. Without concrete decarbonisation targets and government coordination, innovation is more diffused and less focused on the energy transition. Moreover, the uneven pace of innovation across different parts of the metropole means that there is still work to do to decarbonise, and inequality remains a key barrier to a just and equitable transition. Nevertheless, the Green Tech Evolution builds momentum and the beginnings of an inclusive and thoughtful transition begin to emerge by 2040. With greater coordination across the Paris Metropole, on both climate action and for all to share in the benefits of the Green Tech Evolution, the Paris Metropole moves on-track to meet its 2050 carbon neutrality goal.

20

Given the current biodiversity crisis and our understanding of the links between climate and green infrastructure, this scenario assumes that green start-ups will develop solutions that tackle both climate and biodiversity issues. Will that be effective?

Perrine Hamel Natural Capital Project, USA and Centre International de Recherche sur Environnement et Développement (CIRED), France.

21

SCENARIO TWO THE BLAME GAME

THE IMPACT OF COVID-19 ON THE PARIS METROPOLEThe COVID-19 pandemic lingers far longer than expected. The slow economic recovery does little to improve unemployment levels, and bankruptcies become inevitable. Temporary unemployment schemes are repeatedly extended. Bailouts are issued to small and medium-sized businesses in traditional industries, while previously planned reforms, such as those on pensions, are reversed. The resultant debt burden and limited real signs of economic recovery lead to rising distrust of government for its perceived failure in dealing

with the crisis. Citizens’ anger also turns towards outsiders and immigrants, as well as to public institutions. Protests and disruption increase, particularly by marginalised residents. Longer-term policy decisions are placed on hold, as immediate social and economic problems take centre stage in the national policy debate. Policymakers’ efforts to manage the pandemic have uneven results. The poorer areas are hit worst, both in terms of health outcomes and economic impact.

THE BLAME GAME: KEY ATTRIBUTES Q The impact of COVID-19 lingers, both in health and economic terms, and mistrust in government and institutions rises. Poorer areas are hit hardest.

Q The 2020s are a turbulent time. Longer-term decisions are placed on hold as immediate social and economic problems take centre stage. Policies are reactive and their results uneven. A sustained economic recovery remains elusive.

Q The focus is on restarting the economy, rather than supporting the energy transition. Government policies benefit traditional industries and jobs, with little attention to climate change.

Q The impact of severe weather events on poorer areas highlights inaction and inequality. Climate injustice, as well as energy access and affordability, are growing problems that lead to anger and the beginning of activism-led action.

Q Radical new policies and public-private partnerships start late and are challenging, but the 2040s begin a carbon-neutral renaissance for the Paris Metropole. There is still a long way to go – however, momentum and a region-wide approach mean climate neutrality is achievable beyond 2050.

23

THE BLAME GAMEThe 2020s is a turbulent economic, social and political time, with no clear leadership or direction provided by government, business or civil society. The focus is on restarting the economy, rather than accelerating the energy transition or addressing inequality. Government funding and fiscal support schemes benefit traditional industries and jobs. But little attention is given to climate change, domestically or globally. Security measures are introduced to prevent violent protests from recurring, especially in the poorest departments. Growth does pick up, but in fits and starts, and a sustained economic recovery remains elusive. Policies are reactive, and measures to address systemic racism and inequality lose focus and momentum.

By the late-2020s, increasingly frequent summer droughts and heatwaves cause alarm about the metropole’s ability to safeguard the poorest and most vulnerable; reports of deaths among the elderly create fear and anger. The initial wave of government funding provides more amenities to help citizens cope with the effects of extreme weather events such as flooding and heatwaves. Yet with little focus on climate change mitigation, energy consumption from air conditioning increases greenhouse gas emissions. Funding levels are too low. Government finances, severely strained by the pandemic, are yet to recover. Community-led social provisions become more noticeable across the Paris Metropole. As climate events become more frequent, impact is especially severe for vulnerable segments of society that lack savings or suffer from underlying health problems. As anger mobilises people, they demand action.

Climate injustice becomes the proxy for wider economic and social injustices. The importance of making the Paris Metropole climate-resilient rises in profile and popularity. Redirecting their

anger, citizens blame large companies, accusing them of being major emitters.

In the 2030s, the interests of Paris’s disparate groups coalesce around the need for urgent climate action. The tone is one of panic: fast action needs radical solutions; the policy debate becomes extreme. Litigation becomes a central theme in political manifestos. Political leaders who vie to be the most aggressive against the establishment enjoy electoral success. These politicians ban non-essential polluting transport and place high taxes on polluting industries. An overhaul gets underway in Paris Metropole; initiatives include the electrification of the transport sector, clean power generation, caps on international flights and the compulsory refurbishment of non-compliant buildings. The complete overhaul requires the rerouting of tramlines, tunnels and other transport links. The Paris Metropole faces huge disruption as the power grid, streets, water infrastructure, digital cabling and green spaces are all affected by infrastructure development projects.

This is achieved through public-private partnerships, with the Paris government using its fiscal levers and balance sheet to stimulate

...Infrastructures are based on a ‘risk as usual’ design philosophy; the opposite of what a truly resilience-led planning policy might require.”

Raphaël Languillon-Aussel Senior Study Officer at La Fabrique de la Cité, France, and Senior Lecturer at the University of Geneva, Switzerland

24

private investment. Measures taken include issuing green bonds and using innovative green financing instruments to raise private capital for large infrastructure and other projects. This approach is justified with the arguments that “it’s a climate emergency” and that a large-scale infrastructural overhaul “will create economic growth”. Despite the already huge debt burdens, additional government spending is paid for by raising taxes and borrowing. Companies face increasing pressure to act as responsible citizens and feel compelled to fund parts of these projects. As the French and global economies struggle to recover, low interest rates and lack of other investment opportunities increase the attractiveness of investing in these projects. This creates tension between generations as the young object to borrowing against resources they need for their future. Eventually, these tensions ease as climate-related investments future-proof the city for generations.

Despite the turmoil of the 2020s and the huge upheaval of the 2030s, Paris in 2040 is once more attracting new visitors and people wishing to move there. The city is more liveable, peaceful and green. Fresh air and low noise levels make it an attractive work, investment and home environment. The region is once again

a magnet for industry, innovation, tourism and creativity. However, only the wealthy can afford to live there.

Bridging to carbon neutrality

Fortunately, spill-over effects from the growth and prosperity of the City of Paris start to have a positive effect on the wider Paris Metropole area. Infrastructure expansion continues into the Paris Metropole too, where green space, public transport and new digital technologies are deployed for last-mile, on-demand transport. Green, lower-carbon islands appear across the metropole. Growth slowly shifts from being reliant on government actions and incentives to being business and market-driven. In order to achieve its goal of carbon neutrality, the metropole needs to remain focused in the 2040s on driving prosperity beyond the City of Paris and into regions that have suffered decades of economic and social hardship. Bridging the difference between the haves and have-nots will require a region-wide approach and redistributive policies, with wealthier communes funding their neighbours’ transition. As momentum builds, everyone benefits and beyond 2050 the Paris Metropole moves towards climate neutrality.

25

SCENARIO THREE PAVING THE WAY

THE IMPACT OF COVID-19 ON THE PARIS METROPOLEIn 2019, polls12 showed that the French consider climate change a top concern, including a recognition that climate events impact society unequally. The COVID-19 pandemic amplified these social injustices. Deep inequalities left disproportionately large groups of citizens unemployed and suffering from both health and economic repercussions in the poorest Parisian suburbs. The depth and inequity of the crisis led to a period of self-reflection in the French

capital that profoundly influenced grassroots movements. Local mayors called for a new post-pandemic world, one that would prioritise community health and well-being over an immediate economic bounce-back.

PAVING THE WAY: KEY ATTRIBUTES Q COVID-19 exacerbates issues of inequality and social injustice across the Paris Metropole and sparks a period of self-reflection for citizens.

Q Local issues drive community-led action in the 2020s. Local leaders seek comprehensive ways to generate sustainable economic growth.

Q Climate change remains on the political agenda, but action is initially fragmented and concentrated in the wealthiest departments.

Q Disparity across departments – in reducing emissions and in resilience to climate impacts – leads to greater emphasis on a grassroots governance model. Increased cooperation and sharing best practice help to reduce emissions and make steady, inclusive progress to address climate change.

Q The Paris Metropole takes a global leadership position in the 2040s based on its success in forging a fair energy transition for all. The metropole is clearly on the way to achieving its 2050 targets.

27

PAVING THE WAYDomestic businesses lead the economic recovery, as international supply chains remain disrupted in the early 2020s. Domestic demand is increasingly met by domestic supply, with French businesses prospering. At the local level, public bodies are mandated to set their own budgets and policies. As the Parisian debate on inequalities grows, so too do the calls by empowered local government officials to include redistributive mechanisms to ensure better health and more jobs for the poorest departments. These complex local problems are addressed in public debates and citizens’ assemblies. Representatives from local government, business, citizens and academia seek thoughtful and comprehensive policies to generate long-term economic growth and better healthcare. By the early 2030s, localised action has significantly increased and improved citizens’ well-being.

This Île-de-France archipelago, made up of socioeconomic inequalities in lifestyles and housing density, has repercussions for the climate: the rich want to be virtuous, but the costs for the less well-off are difficult to bear.

Julien Damon Sociologist and Associate Professor at the Paris Institute of Political Studies, France

28

Alongside the emergence of a grassroots governance model, questions of climate change and decarbonisation remain on the political agenda, particularly in the wealthiest departments. It remains a cause among cosmopolitan urbanites, but the climate impacts are increasingly being felt by all. In the mayoral campaigns of the wealthiest departments, candidates vie to outdo one another with climate ambitions. Several emissions-reduction schemes emerge, which are showcased at the Olympic and Paralympic Games in 2024, the first carbon-neutral Olympics. Olympic venues in Paris Metropole, such as those in Saint-Ouen and Saint-Denis, invest in green infrastructure and carbon-neutral venues; while the inner city increases pedestrian spaces, and creates bicycle lanes and car-free areas. A smartphone app connects users to multiple modes of mobility – trains, electric vehicles, e-scooters and other forms of public transport. These policies and technologies coincide

with the Paris mayor’s aspiration to create a “15-minute city” in which all residents live within 15 minutes walking or cycling of their daily activities. But the lower-income departments and regions lack the resources to make such changes. While there is better collaboration between Paris Metropole cities, the energy transition moves forward at two different speeds: faster uptake in the wealthier regions and a slower or stationary response in the poorer regions.

Electrification soon becomes the most dominant form of green infrastructure, particularly in reducing the environmental impact of urban transport. Multiple solutions are tested for last-mile delivery to combat pollution and improve the efficiency and use of public transport systems. On-demand transport, mobility hubs and e-bikes, all fuelled by electricity from renewable and other zero-carbon sources, provide citizens with new and diverse transport

29

alternatives. Early and rapid deployment of hydrogen as a fuel source is a critical part of the solution to decarbonise heavy road and river freight transport. Cities and municipalities, in particular, argue the co-benefits of less noise, reduced air pollution and lower carbon emissions when implementing radical green policy changes.

Paris Metropole’s aging housing stock is difficult to decarbonise. However, new regulations are introduced to improve insulation in buildings, and targets are set to decarbonise district heating networks. Since wealthier departments with older housing stock are the primary source of building emissions, this is a big step towards the Paris Climate Action Plan target of 1 million buildings thermally renovated and made more energy efficient by 2050.

Even though the grassroots governance model has delivered significant benefits for the worst off, their gains are modest compared to the best off. This disparity has increased during

the 2020s and becomes more apparent in the 2030s as climate impacts, in the form of extreme weather events such as heat waves and flooding, become more frequent.

There is an increasing recognition of the need and opportunity to build on the success of the grassroots governance model to address climate change, for the benefit of all. Communes across the Paris Metropole start to come together. Construction subsidies for transport infrastructure projects link the industrial hubs to more deprived urban areas. Gradually, best practice – e.g. to improve the energy efficiency of buildings and decarbonise heating – is shared between the metropole’s communes. The transport and construction sectors become a new source of blue-collar jobs in some areas, as does improving the energy efficiency of homes. Given the capital-intensive nature of these projects and modest recovery of government finances following the pandemic, tough decisions are made to redirect funds from elsewhere to support infrastructure

30

and decarbonisation projects across the Paris Metropole. This leads increasingly to the formation of new public-private partnerships to fund these expensive projects. These partnerships give rise to objections initially, but prove invaluable in enabling the projects’ construction.

As the transport networks reach further into the regions, they provide much-needed access to commuters. The increasingly connected Paris Metropole opens up new employment opportunities and enables collaboration, education and retraining. At the same time, fundamental changes occur in other sectors of the Paris economy, such as in the motor industry. As it electrifies, the industry grapples with how to equip workers with the skills required for future employment and the transition from old to new jobs. However, the enhanced grassroots and community-led governance model is well placed to manage this transition.

In the second half of the 2030s, the cities of the Paris Metropole begin to set up ambitious projects together to increase biodiversity and remove greenhouse gases. The metropole in 2040 is an exemplar among other metropolitan areas. It has taken significant steps to go carbon-neutral in a way that is fair and equitable. It hosted the first carbon-neutral Olympics and Paralympics in history and now provides electrified transport services to its citizens and visitors.

The metropole is a more pleasant city to live in. There are more green spaces. Buildings are energy-efficient and comfortable. Commuting is more efficient, as fewer cars are on the road and most are electric. Industrial hubs and suburbs are connected to the urban centres. Blue-collar sectors are once again thriving.

Bridging to carbon neutralityWhile the Paris Metropole has made significant progress towards its carbon-neutral goal, the complex nature of decarbonising sectors such as agriculture and aviation becomes apparent. But the Paris Metropole does not control all the levers necessary to achieve full carbon neutrality in these sectors. The metropole starts working with the national government to decarbonise agriculture, driving demand for more environmentally sustainable agricultural and food products. It works with the European Union to enhance its rail transport links with the rest of Europe. It joins with other global cities like London, New York, Beijing and Tokyo to push for a step change in the uptake of sustainable aviation fuels.

The city takes a global leadership position, based on its successes to date in forging a comprehensive and just energy transition that is fair for all, and drives action in the hardest-to-decarbonise sectors within and beyond the Paris Metropole.

The Paris Metropole is on a good trajectory to achieve its 2050 carbon-neutral objective.

31

CONCLUSIONThe 2018 Paris Climate Action Plan sets out an ambitious target for an inclusive and resilient carbon-neutral city, powered entirely by renewable energy by 2050. While the scenarios indicate that the Paris Metropole could be well-positioned to achieve these objectives, it also faces significant challenges in becoming carbon-neutral even as it strives to enhance inclusivity of the transition and resiliency to climate impacts. Rising levels of income and wealth inequality, the growing frequency of extreme weather events, and an old and inefficient building stock complicate the task ahead, as does the Île-de-France’s layered administrative divisions.

But ultimately, the Paris Metropole has an opportunity to lead climate action at the local, national and European levels. Given its association with the 2015 Paris climate agreement the area has important symbolic value in efforts to tackle climate change. The City of Paris has significant influence in the global movement for local climate action, demonstrated by its leadership role in the C40 Cities Climate Leadership Group. Upcoming global events, such as the 2024 Paris Olympics, represent further opportunities for the area to build and enhance its credentials as a beacon for bold climate action. The journey ahead will not be easy, but the pay-off could be huge. And the world will be watching – and learning.

32

CITY SOLUTIONS

Shell City Solutions, part of Shell New Energies, helps cities around the world navigate energy transition though integrated urban solutions that improve urban mobility, energy and the environment. We work collaboratively with governments, industry and society to co-create and test innovative concepts, technologies and business models. The Shell City Solutions team draws on global expertise across Shell and its partners to offer seamless implementation and deployment.

www.shell.com/citysolutions

Leonard is the innovation and foresight platform set up by VINCI. We bring together entrepreneurs, thinkers and experts from different fields to track emerging trends in VINCI’s business activities and markets, identify long-term challenges and goals, pinpoint opportunities for change in the Group’s businesses and organizational structure, identify new growth drivers and developing innovative projects incubation and acceleration programs open to both Group employees and startups.

These scenarios can be a powerful tool to raise awareness of the need to act now if Paris is to achieve carbon neutrality by 2050. We were very pleased to collaborate with Shell and gather such an expertise.

leonard.vinci.com

KEY INSIGHTS Paris Metropole: Becoming Carbon-Neutral by 2050

Q Align governance at all levels

Q A just transition that is fair for all will be critical

Q Parts of the Paris Metropole that can move quickly must do so

Q Progress on energy transitions depends on collaboration across government, society and business

33

ACKNOWLEDGEMENTSWe wish to thank the many people consulted externally in the development of this work.In particular, we thank our collaboration partners, the OECD, the participants and experts who attended the workshop, and Vivid Economics for the analysis.

GLOSSARY ADEME Agency for Ecological Transition, France.

C40 C40 Cities Climate Leadership Group.

COP 21 Twenty-first session of the Conference of the Parties to the United Nations Framework Convention on Climate Change.

INSEE National Institute of Statistics and Economic Studies, France.

Paris Climate Action Plan Outlines a common future for a carbon-neutral city by 2050.

PM PM10 are inhalable particles, with diameters that are generally 10 micrometers and smaller; and PM2.5 are fine inhalable particles, with diameters that are 2.5 micrometers and smaller. Particles less than 10 micrometers in diameter can penetrate the lungs and even the bloodstream.

The Habitat III Conference United Nations Conference on Housing and Sustainable Urban Development, which took place in Quito, Ecuador, on October 17-20, 2016.

Opinions expressed by individuals do not reflect the position of their company.

ENDNOTES1 C40: Click here for the Link.2 The Paris Agreement was signed at COP21 in

Paris in 2015 and aims to strengthen the global response to the threat of climate change.

3 IBM Research Insights, Global Location Trends, 2019: Link.

4 OECD Stat: Link.5 Emissions data are not available for the Paris

Metropole as defined in this scenarios sketch, so we use the Île-de-France as a proxy to represent the current state of emissions for the area.

6 LeasePlan, EV Readiness Index 2020: Link.7 INSEE, Statistiques locales – Répartition des actifs

occupés selon le moyen de transport utilisé pour se rendre au travail, 2017: Link.

8 See note 69 INSEE, Analyses Ile-de-France: Se chauffer en Ile-

de-France: la petite taille des logements atténue le cout d’une performance énergétique médiocre, figure 1, 2018 : Link.

10 Données de l’année 2018, Principaux résultats, OLAP, 2018.

11 Enquête TREMI, Travaux de Rénovation Energétique des Maisons Individuelles, campagne 2017, ADEME, 2017: Link.

12 Ipsos and Sopra Steria institutes on French people’s concerns, 2019.

34

35

On July 6, 2017, Paris published the new Climate Action Plan outlining its goal for carbon neutrality by 2050. We believe meeting this goal will be extremely challenging but possible. This report is not intended to be proscriptive; there are other pathways for the Paris Metropole to follow in reaching its target.

This sketch, which is a collaboration between Leonard and Shell, contains insights from Shell’s new Scenarios Sketch “Paris Metropole: Becoming Carbon Neutral by 2050”. The New Lens Scenarios and Scenario Sketches are part of an ongoing process used in Shell for 50 years to challenge executives’ perspectives on the future business environment.

Scenarios don’t describe what will happen, or what should happen, rather they explore what could happen. We base them on plausible assumptions and quantification, and they are designed to stretch management’s thinking and even to consider events that may only be remotely possible. Scenarios, therefore, are not intended to be predictions of likely future events or outcomes or a strategy. Investors should not rely on them when making an investment decision with regard to Royal Dutch Shell plc securities.

It is important to note that the suggestions contained in this report are those to be taken by the Paris Metropole, and not necessarily Shell. While Shell is supportive of the Paris Metropole target of carbon neutrality by 2050, our current business plan is not consistent with the proposed EU target. However, as announced on April 16, 2020, Shell aims to be a net-zero emissions energy business by 2050. Accordingly, we expect that over time our business plan will change as society and our customers move toward meeting the goals of the Paris Agreement.

The companies in which Royal Dutch Shell plc directly and indirectly owns investments are separate legal entities. In this sketch “Shell”, “Shell Group” and “Royal Dutch Shell” are sometimes used for convenience where references are made to Royal Dutch Shell plc and its subsidiaries in general. Likewise, the words “we”, “us” and “our” are also used to refer to Royal Dutch Shell plc and its subsidiaries in general or to those who work for them. These terms are also used where no useful purpose is served by identifying the particular entity or entities.

This “Paris Metropole: Becoming Carbon Neutral by 2050” scenarios sketch contains forward-looking statements that may affect Shell’s financial condition, results of operations, and businesses of Royal Dutch Shell. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements are statements of future expectations that are based on management’s current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in these statements. Forward-looking statements include, among other things, statements concerning the potential exposure of Royal Dutch

Shell to market risks and statements expressing management’s expectations, beliefs, estimates, forecasts, projections and assumptions. These forward-looking statements are identified by their use of terms and phrases such as “aim”, “ambition”, ‘‘anticipate’’, ‘‘believe’’, ‘‘could’’, ‘‘estimate’’, ‘‘expect’’, ‘‘goals’’, ‘‘intend’’, ‘‘may’’, ‘‘objectives’’, ‘‘outlook’’, ‘‘plan’’, ‘‘probably’’, ‘‘project’’, ‘‘risks’’, “schedule”, ‘‘seek’’, ‘‘should’’, ‘‘target’’, ‘‘will’’ and similar terms and phrases. There are a number of factors that could affect the future operations of Royal Dutch Shell and could cause those results to differ materially from those expressed in the forward-looking statements included in this sketch including (without limitation): (a) price fluctuations in crude oil and natural gas; (b) changes in demand for Shell’s products; (c) currency fluctuations; (d) drilling and production results; (e) reserves estimates; (f) loss of market share and industry competition; (g) environmental and physical risks; (h) risks associated with the identification of suitable potential acquisition properties and targets, and successful negotiation and completion of such transactions; (i) the risk of doing business in developing countries and countries subject to international sanctions; (j) legislative, fiscal and regulatory developments including regulatory measures addressing climate change; (k) economic and financial market conditions in various countries and regions; (l) political risks, including the risks of expropriation and renegotiation of the terms of contracts with governmental entities, delays or advancements in the approval of projects and delays in the reimbursement for shared costs; and (m) risks associated with the impact of pandemics, such as the COVID-19 (coronavirus) outbreak, and (n) changes in trading conditions. No assurance is provided that future dividend payments will match or exceed previous dividend payments. All forward-looking statements contained in this sketch are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Readers should not place undue reliance on forward-looking statements. Additional risk factors that may affect future results are contained in Royal Dutch Shell’s Form 20-F for the year ended December 31, 2019 (available at www.shell.com/investor and www.sec.gov). These risk factors also expressly qualify all forward-looking statements contained in this sketch and should be considered by the reader. Each forward-looking statement speaks only as of the date of this sketch, October 15, 2020. Neither Royal Dutch Shell plc nor any of its subsidiaries undertake any obligation to publicly update or revise any forward-looking statement as a result of new information, future events or other information. In light of these risks, results could differ materially from those stated, implied or inferred from the forward-looking statements contained in this sketch.

We may have used certain terms, such as resources, in this sketch that the United States Securities and Exchange Commission (SEC) strictly prohibits us from including in our filings with the SEC. Investors are urged to consider closely the disclosure in our Form 20-F, File No 1-32575, available on the SEC website www.sec.gov.

LEGAL DISCLAIMER

www.shell.com/scenariosKeep in touch and explore our latest scenarios.© 2020 Shell International B.V. and Leonard All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, published or transmitted, in any form or by any means, without the prior written permission of Shell International B.V.

YEARS50#ShellScenarios

2015 20252020