Madrid-based oil and gas company Repsol on Monday announced that it will eliminate by 2050 all greenhouse gas emissions from its own operations and from the energy it sells to its customers. The company’s statement is a first among major oil and gas companies and may be a harbinger of things to come in the hydrocarbon industry.

Repsol has taken on the issue that confronts every major oil and gas producer: how does the company pay more than lip service to the effects of climate change. In addition to setting its net-zero emissions target for 2050 (from a 2016 baseline), the company also has targeted a net emissions reduction of 10% by 2025, 20% by 2030 and 40% by 2040.

The company also said that it will write down €4.8 billion ($5.3 billion) in a noncash, after-tax impairment charge this year but that the charge “will neither affect cash flow nor shareholder remuneration, which is among the most attractive in the Spanish stock market and in the sector worldwide.” At Tuesday’s close on the XETRA exchange, shares were paying a dividend yield of 6.47%.

In mid-November, the International Energy Agency issued the 2019 edition of its World Energy Outlook, highlighting its conclusion that under either current or stated policies, greenhouse gas emissions continue rising through 2040 and don’t even peak until well after the Paris Agreement’s 2050 target for net-zero emissions in order to hold the increase in global temperatures to “well below 2° C … and pursuing efforts to limit [the rise] to 1.5° C” by 2100.

Repsol CEO Josu Jon Imaz said:

We are convinced that we must set more ambitious objectives to fight climate change. We believe now it is the right time for Repsol. We do it with the utmost confidence that we invest for the future. Addressing the significant challenges that lie ahead with strategic clarity is what will allow us to turn them into opportunities. We are convinced that this strengthens our project that is sustainable, attractive and profitable for all our stakeholders.

To meet its goal, Repsol is raising its target for low-carbon electricity generation from 4,500 megawatts by 2025 to 7,500 megawatts, and the company will begin to expand its renewable energy efforts internationally. Repsol also plans to build 1,600 megawatts of new wind and solar projects, bringing its total renewable portfolio capacity to 5,600 megawatts.

In its upstream oil and gas business, Repsol says it will prioritize value generation over production growth, “placing the emphasis on rotation and improvement of the asset portfolio and on cash generation.” To achieve that goal, the company will adopt a strategy of balancing oil and gas reserves focusing on gas as “the fuel for the energy transition while also taking into account the active role that oil must play in a more decarbonized world.”

Repsol plans to make future investments using carbon prices of up to $40 per metric ton by 2025 and up to $70 a ton by 2040 that it says “will favor investments in renewable energy, efficiency and the circular economy.” At least 40% of executive and managerial pay will be liked to meeting the goals the company has set.

Repsol’s market cap of around $25 billion is far below that of the world’s biggest oil producers like Exxon Mobil, Royal Dutch Shell and Chevron, and combined with its current focus on natural gas, oil refining and marketing and renewables, the company is better positioned to set these goals.

The targets the company has set are nonbinding, but that does not diminish their force. Repsol’s full plan is outlined in its announcement.

The company’s shares closed up slightly Tuesday at €14.14, in a 52-week range of €12.39 to €15.61. The 12-month consensus price target is €16.38.

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