Working to catch up with its European peers, Norwegian state-controlled oil major Equinor ASA said Feb. 6 it will expand upon its climate goals and cut its net carbon intensity in half by 2050 by also including scope 3 emissions, which occur in the products it sells.

In early January, Equinor said it planned to reduce greenhouse gas emissions from its Norwegian-owned or controlled operations, known as scope 1, and those that come from the electricity the company purchases and uses, known as scope 2, by 40% by 2030, 70% by 2040 and to near zero by 2050.

"Whilst there is little control over scope 3 emissions, especially for a business that is upstream concentrated, this still signals a move in the right direction in terms of [transparency]," S&P Global Ratings analyst Edouard Okasmaa said in a Feb. 7 email. "Having said that, there are a lot of uncertainties around how scope 3 emissions are estimated, but as more companies go this route, we will also have more comparison points."

In 2018, scope 1 and 2 emissions from Equinor's fields and plants were approximately 13 million tonnes, which was almost the same as its 2005 emissions level.

"Equinor already has some of the more aggressive targets out there for reducing operated emissions. However, given that scope 1 and 2 only make-up about 5-10% of total emissions, the pressure to incorporate scope 3 was [building]," Morningstar analyst Allen Good said in a Feb. 6 email.

Scope 3 emissions account for the remaining 90% to 95% of most majors' total emissions, Good said. Scope 3 emissions occur throughout the value chain, across the upstream and downstream segments.

The company has "several levers" and "significant optionality" to reduce its carbon intensity, particularly through the increased use of renewables, as well as carbon capture and utilization storage and hydrogen technology, Equinor President and CEO Eldar Sætre said during the company's Feb. 6 fourth-quarter 2019 earnings call.

"We know that in order to reach the goals of the Paris Agreement, there will have to be significant changes in the energy markets, which means that also our portfolio will have to change accordingly, to remain competitive," Sætre said during the call. "So we will produce less oil in a low-carbon future."

But Equinor's Feb. 6 announcement was panned by some. Mark van Baal, founder of Dutch activist group Follow This, said Feb. 6 that Equinor should set specific emissions reductions targets, not intensity-based targets.

Intensity-based targets measure the amount of greenhouse gas emissions released into the atmosphere divided by net hydrocarbon production, Equinor said. So, theoretically, if output rises, emissions could still grow.

Edward Mason, head of responsible investment for the Church of England, which has been investing in oil companies, also criticized Equinor's latest move to reduce its carbon footprint, saying the company needs to do more.

"Equinor is doing some great stuff, particularly on scope 1 and 2, but I'm not sure a pledge to halve carbon intensity by 2050 does any more. Repsol SA has shown the net-zero 2050 ambition we need," Mason said in a Feb. 6 Twitter statement.

Although Royal Dutch Shell PLC, BP PLC and Italy's Eni SpA have all outlined short-term emissions reductions goals, Spain's Repsol was the first to set long-term targets, unveiling in December 2019 an ambitious plan to be reached by 2050 that includes reducing scope 3 emissions. From a 2016 baseline, Repsol is planning to reduce its carbon intensity by 10% by 2025, 20% by 2030, 40% by 2040 and to net zero by 2050.

Equinor, formerly Statoil ASA, changed its name in 2018 as part of an effort to transform itself into a broader energy company. Equinor hopes to grow its current renewable capacity by an annual rate of 30% to 4 GW to 6 GW by 2026, and to 12 GW to 16 GW by 2035, Sætre said.

"Equinor is already pushing strongly into renewable power through its offshore wind business, which is one of the most effective ways to reduce full-cycle emissions, so they're well on their way," Good said.

In an effort to diversify its energy mix, Equinor is using its offshore expertise to position itself as a major player in the rapidly growing offshore wind sector in Europe. In January, Equinor said that construction on three Dogger Bank offshore wind farms in the U.K. North Sea, totaling 3.6 GW, had begun. The facility has been billed as the world's largest offshore wind farm.

Equinor Wind US LLC is also a subsidiary of Equinor. Beyond its investment in wind, in December 2019, Equinor acquired another 5.2% stake in solar developer Scatec Solar ASA, raising its total interest in the renewables business to 15.2%.

For the fourth quarter of 2019, Equinor's adjusted earnings fell 19% year over year to $3.55 billion, from $4.39 billion in the prior-year period, amid lower prices for both liquids and gas.

S&P Global Ratings and S&P Global Market Intelligence are owned by S&P Global Inc.